A PROJECT REPORT

ON

“A COMPARATIVE STUDY OF FINANCIAL PERFORMANCE

OF TVS MOTORS AND HERO MOTORS”
Research Project Submitted in Partial Fulfilment of the requirements for the
Degree of

B.Com Honours

By

Ritika Verma

To the

DEPARTMENT OF COMMERCE

BHOPAL SCHOOL OF SOCIAL SCIENCES

APRIL, 2021

Submitted by: Guided by:

Ritika Verma Dr. Vinod Adwani

Associate Professor

Department of Commerce
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 CERTIFICATE

It is certified that the work contained in the project report titled “A COMPARATIVE STUDY
OF FINANCIAL PERFORMANCE OF TVS MOTORS AND HERO MOTORS” by “RITIKA
VERMA” has been carried out under my supervision and that this work has not been submitted
elsewhere for a degree*

Signature of Supervisor: ………………

Name: Dr. Vinod Adwani, Associate Professor

Department: Commerce

Bhopal School of Social Sciences

April, 2021

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 DECLARATION

I hereby declare that this project entitled “A COMPARATIVE STUDY OF FINANCIAL

PERFORMANCE OF TVS MOTORS AND HERO MOTORS” was carried out by me for the
degree of B.Com Honours under the guidance and supervision of Dr. Vinod Adwani of Department
of Commerce, BSSS College. The interpretations put forth are based on my reading and
understanding of the original texts and they are not published anywhere in any form. The other
books, articles and websites, which I have made use of are acknowledged at the respective place
in the text. This research report is not submitted for any other degree or diploma in other
University.

Ritika Verma

B.com (Honours) 3rd year

Place: Bhopal

Date: 30th April, 2021

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 ACKNOWLEDGEMENT

The success of any project study depends upon a number of factors among which the proper
guidance from the faculty in the institute plays an important role.

I take this opportunity to convey my sincere thanks and gratitude to all those who have directly
or indirectly helped and contributed towards the completion of this project.

I really indebted to Dr. Vinod Adwani, PhD, Department of Commerce, BHOPAL SCHOOL OF
SOCIAL CIENCES (M.P.) for this kind hearted approach. His timely guidance, supervision and
encouragement have helped me to get this golden opportunity.

My project guide provided me his expert advice, inspiration and moral support in spite of his
busy schedule and assignments, has mainly provided my understanding of this project. I am very
grateful to his kind hearted approach and encouragement, which helped me immensely in
competition of this project report.

Last but not the least, I say only this much that all are not mentioned but none is forgotten and I
will like to extend my special thanks and gratitude to my parents who always encourage me in
pursuit of excellence.

(RITIKA VERMA)

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 INDEX

S.NO. CONTENTS PAGE NO.

1. Rationale of the study 7

2. Introduction to the industry 7

3. Introduction to the company 8

4. Justification of the topic 10

5. Review of literature 12

6. Objectives of the study 21

7. Research Hypothesis 21

8. Scope of the study 21

9. Limitation of the study 22

10. Data representation and interpretation 24

11. Hypothesis testing 38

12. Major findings 40

13. Discussions and suggestions 40

14. Conclusions 41

15. References 42

16. Annexure 43

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CHAPTER 1: INTRODUCTION OF THE TOPIC

1.1 Rationale of the Study

1.2 Introduction to the Industry
1.3 Introduction to the Company
1.4 Justification of the Topic

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 INTRODUCTION OF THE TOPIC

1.1 Rationale of the Study:

1.1.1 Why the need for the study?

 To compare the companies to identify which company is the market leader.

 To understand their financial performance.

1.1.2 What information will the study add?

 It will help in analysis of companies.

 It will make us understand the companies’ market share, financial strength and contribution
to the society.

1.2 Introduction to the industry:

Automobile is one in every of the biggest industries in worldwide market. Being the chief in
product and procedure technology withinside the production sector, it's been diagnosed as one of
the drivers of monetary growth. During the last decade, properly directed efforts were made to
offer a brand new appearance to the auto coverage for figuring out the sector’s complete ability
for the economy. Aggressive advertising and marketing through the automobile finance businesses
have additionally performed a giant function in boosting vehicle demand, specifically from the
populace withinside the center earnings group.

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A Nations financial system is widely known from its transport system. For immediately and fast
increase in financial system, a well-evolved and well-networked transportation system is critical.
As India’s delivery network is growing at a quick pace, Indian Automobile Industry is developing
too. Also, the Automobile enterprise has sturdy to and fro linkages and hence affords employment
to a huge phase of the population. Thus the position of Automobile Industry could be very critical
in Indian financial system. Various sorts of vehicles are manufactured with the aid of using the
Automobile Industry. Indian Automobile Industry consists of the producing of trucks, buses,
passenger cars, defense vehicles, two-wheelers.

The automobile producing is dominated by organizations like TVS, Honda Motorcycle and
Scooter India (Pvt.) Ltd., Hero Honda, Yamaha, Bajaj, and so forth. The vehicle business in the
nation is one of the vital areas of the economy as far as the business openings that it offers. The
business straightforwardly utilizes near around 0.2 million individuals and in a indirect way
utilizes around 10 million individuals. The possibilities of the business moreover has an orientation
on the auto-segment industry which is additionally a significant area in the Indian economy
straightforwardly utilizing 0.25 million individuals.

1.3 Introduction to the Company

TVS Motors

TVS Motor Company is the third biggest 2-wheeler organization in India with an income of over
₹18,217 crore (over US$2.9 billion). It has a yearly offer of in excess of 3 million units and a
yearly limit of over 4.95 million vehicles. TVS Motor is additionally the second biggest exporter
in India with fares to more than 60 Countries. An individual from the TVS Group, it is the biggest
organization of the gathering regarding size and turnover.

TVS Motor makes the biggest scope of 2-wheelers, beginning from mopeds, to bikes, suburbanite
bikes, to dashing motivated bicycles like the Apache arrangement and the RR310. Whatever your
prerequisite be, we have one for everybody.

TVS Motor's solidarity lies in its broad innovative work, bringing about items that are industry
driving as far as development. We at TVS convey absolute consumer loyalty by expecting client
need and introducing quality vehicles at the perfect time and at the perfect cost.

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TVS has consistently represented creative, simple to-deal with, and climate amicable items,
sponsored by solid client assistance. In excess of 44 million + customers have purchased a TVS
item to date. TVS items give you only motivations to smile!

The organization has four assembling plants, three situated in India (Hosur in Tamil Nadu, Mysore
in Karnataka and Nalagarh in Himachal Pradesh) and one in Indonesia at Karawang.

Hero Motors

MotoCorp Limited, previously Hero Honda, is an Indian global motorcycle and cruiser producer
situated in New Delhi, India. The organization is the biggest two-wheeler maker on the planet, and
furthermore in India, where it has a piece of the pie of about 46% in the bike classification. Starting
at 31 December 2020, the market capitalization of the organization was ₹68,474 crore (US$9.6
billion).

With advancement at the center of its way of thinking, the New Delhi (India) settled Hero
MotoCorp has been at the forefront of planning and growing innovatively progressed bikes and
bikes for clients all throughout the planet. It turned into the world's biggest two-wheeler maker in
2001, as far as unit volume deals in a schedule year, and has kept up the pined for title for as long
as 20 successive years.

With more than 100 million fulfilled customers across the globe, it keeps on supporting financial
advancement and strengthening through its scope of items and administrations.

Driven by Dr. Pawan Munjal, Chairman, Hero MotoCorp, it has taken fast walks to grow its
essence to 40 nations across Asia, Africa, and South and Central America. Legend MotoCorp is a
genuinely worldwide undertaking with a labor force that involves individuals from various
ethnicities including India, Bangladesh, Colombia, Germany, Austria, Japan and France.

MotoCorp is the predominant market pioneer in India – the world's biggest two-wheeler market –
with more than half offer in the homegrown motorcycle market.

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1.4 Justification of the study

1.4.1 What is the potential utility of the findings (local, national, global)?

 This analysis will help the investors who want to invest in such companies.
 To identify their good points and points of improvement.

1.4.2 What are the implications of the study outcome?

 Comparison for their market share.

 Comparison of profitability.
 Ratio analysis to find out their financial strength.

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CHAPTER 2: LITERATURE REVIEW

2.1 International Reviews

2.2 National Reviews

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 LITERATURE REVIEW

1. Kennedy and Muller (1999), has explained that “The analysis and interpretation of
financial statements are an attempt to determine the significance and meaning of financial
statements data so that the forecast may be made of the prospects for future earnings, ability
to pay interest and debt matureness (both current and long term) and profitability and sound
dividend policy.”

2. T.S.Reddy and Y. Hari Prasad Reddy

Without subjecting these to data analysis, many fallacious conclusions might be drawn
concerning the financial condition of the enterprise. Financial statement analysis is
undertaken by creditors, investors and other financial statement users in order to determine
the credit worthiness and earning potential of an entity.

3. Susan Ward (2008), emphasis that financial analysis using ratios between key values help
investors cope with the massive amount of numbers in company financial statements. For
example, they can compute the percentage of net profit a company is generating on the
funds it has deployed. All other things remaining the same, a company that earns a higher
percentage of profit compared to other companies is a better investment option.

4. M Y Khan & P K Jain (2011), have explained that the financial statements provide a
summarized view of the financial position and operations of a firm. Therefore, much can
be learnt about a firm from a careful examination of its financial statements as invaluable
documents / performance reports. The analysis of financial statements is, thus, an important
aid to financial analysis.

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5. Sheela Christina (2017) [2] carried out the study on Financial Performance of Wheels India
Limited-Chennai. The study deals with Analytical type of research design with the help of
secondary data collection method. For this purpose the researcher took past five years‟
data and also checked out for the validity and reliability before conducting the study.
The researcher used the following financial tool namely ratio analysis, comparative balance
sheet and DuPont analysis and also statistical tools such as trend analysis and
correlation. Profitability ratios indicate there is a decrease in the profit level, utilization of
fixed assets and working capital in the last financial year. Thus the company can take
necessary steps to improve sales and profit. Finally, the study reveals that the financial
performance is satisfactory.

6. Neha Mittal (2018) [3] studies the determination of capital structure choice of the selected
Indian industries. The main objective is to investigate whether and to what extent the main
structure theories can explain the capital structure choice of Indian firms. It has applied
multiple regression models on the selected industries by taking data for the period 2009-
2017. It examines the relevance of capital structure in selected Indian industries based on
a regression analysis and data study. It concludes that the main variables determining
capital structure of industries in India are agency cost, assets structure, non-debt tax shield
and size. The coefficients of these variables are significant at one per cent and five per cent
levels.

7. Tehrani et al2 developed a model that evaluates a companies’ performance using the
technique of data envelopment analysis. Performance assessment indexes were generated
from financial statements as well as ratios from articles and books. Due to the huge number
of variables, data envelopment analysis was used to analyse the collected data in the study.
Parameters used to measure performance included Liquidity, Activity, Leverage,
Economic Added Value, and Profitability ratios. The result of the analysis disclosed that
nine out of the thirty-six companies were efficient; implying that the remainder twenty-
seven companies were inefficient. Some gaps identified in the study are that it focused on

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 evaluating the selected companies for internal efficiency without some form of ranking. It
also excluded qualitative indexes in developing the proposed model.

8. Sumninder and Samiya3 analysed how size, solvency, liquidity, equity capital, and
leverage impacted on the profitability of some life insurance companies. The research
employed multiple linear regression analysis to quantity the extent to which the specified
indicators influenced the profitability of the firms over a 5 year period. The sample for this
study included 18 Indian life insurers (including 1 public and 17 private). The results of
the study revealed that size and liquidity of life insurers positively influenced the firms’
profitability whilst the reverse holds for equity capital. Insurance leverage and solvency
showed no interrelatedness with profitability. A significant gap in the work is to do with
the restricted number of variables deployed as indicators of the profitability of insurance
companies.

9. Bhunia et al4 researched into the financial performance of some public sector
pharmaceutical and drug enterprises in India. The research was aimed at assessing both
short and long term solvency, profitability and liquidity trends, efficiency of financial
processes and to examine determinants of liquidity and profitability behaviours. To
evaluate how the chosen ratios jointly influence the financial position and profitability of
the firms, the multiple regression technique was used. The research sampled two public
enterprises from the pharmaceutical and drug sector that were listed on Bombay Stock
Exchange. The performance indicators deployed included solvency, profitability,
efficiency, financial stability, operating efficiency and liquidity ratios. It found that both
companies had strong liquidity positions. Financial stability of the two companies also
demonstrated an increasingly declining trend. A notable gap in the study was the complete
reliance on published financial data. Thus, it’s prone to all the weaknesses inherent in the
summarized published financial statements.

10. Duarte et al6 studied the interrelatedness between particular operational practices (TQM,
JIT, services outsourcing and ISO certification) and the firm’s profitability and growth as
financial indicators. This work sourced secondary data from PAEP database. Data from
3,589 companies in the industrial sector were sampled for the study. The multiple

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 regression technique was employed in the analysis. The study did not find any positive
relationship between financial performance and operational practices. A negative
association between outsourcing and both profitability and growth was revealed. The study
also found a weak negative association between ISO certification and growth. A key
shortfall of the work is to do with the use of information contained in a database designed
for a different purpose.

11. Assumptah and Martin7 analysed how Capital Structure affect financial performance of
Banks listed in Nairobi Securities Exchange; and explicitly establish how leverage risk,
debt equity, debt, interest rate and their blends affect the operations of listed banks in the
Nairobi Stock Exchange (NSE). Evaluation metrics employed comprised leverage risk,
debt equity ratio, Gross Profit Margin, Debt, interest rates, ROE, ROA and Net Profit
Margin (NPM). The study used descriptive research design. Regression and correlation
analysis were applied to primary quantitative data. The study established that capital
structure influenced the financial performance of 56.4% of the listed banks on NSE. Due
to the limited sample size employed in the regression analysis, the resultant model is
exposed to grave technical interpretation errors.

12. Rouf8 studied the relationship between Profitability and Corporate Governances
Disclosure levels of companies listed in Bangladesh. Data of 94 listed non-financial
companies, was sourced from the library of Dhaka stock exchange. Multiple ordinary least
squares regression was used. The study established a high positive correlation between
profitability and the level of corporate governance disclosure. Major limitation is the use
of exclusively non-financial companies, affecting the generalization of the results. Second,
the author’s generated disclosure index which was employed in the study is sensitive and
can upset the results if the items of information were not properly selected.

13. Kumbirai and Webb9 examined the performance of commercial banks in South from 2005
to 2009. Credit quality, liquidity and Profitability ratios were the metrics deployed in the
analysis. The paper relied on descriptive financial ratio analysis to analyse, measure and

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 describe the performance of the banks. The sampling frame included all the banks
operational in the country between 2005 and 2009. Top five commercial banks by the value
of total assets as at end of the 2009 commercial year were sampled. The study determined
that total bank performance improved significantly in the first two years of the study. A
substantial variation in trend was observed at the inception of the global financial crisis in
2007, hitting peak levels during 2008-2009. This occasioned decreasing profitability,
liquidity and declining credit quality in the South African Banking sector. A notable gap
in the study is the use of only three financial ratios which did not permit a comprehensive
analysis of the banks financial performance.

14. Mwangi and Murigu10 conducted a study to examine the factors that influence the
profitability of Kenya’s general insurance firms. Parameters deployed were Return on
Assets, Retention ratio, Liquidity, Equity Capital, Size, Management Competence index
and ownership. The study adopted a descriptive research design and deployed multiple
regression analysis as well. All the twenty three general insurance companies in Kenya
were sampled. The research employed a four year secondary data spanning 2009 to 2012.
The results showed that higher equity capital, management capability and leverage
facilitated improved financial performance of the general insurance companies in Kenya.
Foreign ownership and size nonetheless, exhibited an inverse relationship with firms’
return on assets. As a limitation, the research did not consider the structural changes in the
Kenyan economy that may affect the financial performance of the general insurance
companies’ overtime. Besides, the changes in financial performance may vary over time
and a linear model can have a strong limitation in capturing the actual relationship among
the variables of interest.

15. Adesina et al11 evaluated how the capital structure of quoted Nigerian banks relates with
their financial performances. Parameters used were profit before tax, equity and debt. The
survey research design was employed and data analysis was undertaken by deploying the
Ordinary Least Square (OLS) regression to capture the kind of the associations between
the banks’ financial performances and the corresponding capital structure. To filter out the
banks in the top tier with relatively high capital structure, stratified sampling was adopted

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 for the study. This resulted in the selection of the ten most capitalized banks. The annual
reports of the sampled banks were scrutinized and data on pretax profits, debt and equity
for 2005 to 2012 period were extracted. The research established a significant positive
impact of equity and debt on financial performance of the banks. The gap in the work is
the exclusive reliance on OLS in a two variable regression analysis, which may expose the
model to technical flaws. The potential threat to the model is its failure to capture the
feedback effect of the variables of interest.

16. Davidson et al12 aimed at establishing the nature of interrelatedness that exits between
financial performance and the culture of an organization. Financial ratios were generated
from firms’ income statements for performance analysis. The organizational culture was
measured by Denison Organizational Culture Survey method. The survey administration
covered a sample of 327 respondents. Correlations coefficients greater than 0.5 level
between some subscales (customer focus, team orientation, vision, core values and
agreements) and some financial ratios were attained. However, most of the correlations
failed the statistical significance test and as a result, the finding were considered as
uncertain. Of the four profitability ratios, the cultural trait consistency displayed significant
correlation with two. A use of one organization, with the respective departments acting as
units of comparison constitute a limitation to the generalization of the findings. Again the
methodology assumed, rather unrealistically, that each department would have a unique
cultural character that may differ to some extent from each other.

17. Mahbuba and Farzana13 surveyed how CSR relates to profitability of Dutch Bangla Bank
Ltd (DBBL). The study employed OLS regression run from SPSS to evaluate the effect of
CSR on profitability. Hypothesis testing was employed to validate the claim of CSR
expenditure having a direct relationship with profit (after tax). Data for the work was
gleaned from the annual reports of the bank for the 2002 to 2011 time period. The research
found that 90.7% of the variations in profits of the bank was accountable to the benefits
emanating from corporate social responsibility. The use of only one profitability measure,
profit after tax, in the research constitute a limitation. The study could have evaluated the

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 relationship between the dependent variable, CSR and other profitability ratios for a wider
scope of the analysis and hence conclusions.

18. Anlesinya et al15 investigated a possible correlation of corporate social responsibility and
financial performance of MTN Ghana Limited. Their work also ascertained the extent of
variability in the financial performance that was explained by identified constituents of
CSR namely, environmental, community, consumers/customers and employees’
responsibility. Questionnaire administration was employed to collect the required data.
Data collected was analysed with the aid of Statistical Product and Services Solutions
(SPSS) version 16.0. Of the estimated forty (40) management staff of MTN Ghana Limited,
thirty-five (35) participants were selected from the target population. Standard multiple and
hierarchical regression tools were the analytical methods employed for the work. The work
revealed a positive relation between MTN’s financial performance and corporate social
responsibility. It was also found that, only CSR towards community accounted for the
highest variance in corporate financial performance. A major limitation is the scope of
using only MTN whereas there are other major players in the telecommunication sector.
Also, the point of view of customers should have been sought via primary sources.

19. Danquah16 assessed the effect of Emotional Intelligence (EI) on Relationship Marketing
(RM), financial performance, service quality and customer satisfaction while assessing the
mediation of RM, customer satisfaction and service quality in the EI and financial
performance relationship. This study adopted a descriptive/quantitative research technique.
It also combined primary (questionnaires) with secondary (annual reports) data for the
study. Data analysis was done using SPSS. Respondents, 220 employees and customers for
each bank, were contacted from 20 out of the 28 banks. The study established a positive
relationship between emotional intelligence and relationship marketing, service quality,
customer satisfaction and financial performance. Emotional intelligence came out as a
strong predictor of service quality, customer satisfaction, relationship marketing and
financial performance. Relationship marketing plays the key mediation role in the
relationship between EI and financial. Two gaps were identified. First, Customer loyalty
could have been included and used to assess its relationship with emotional intelligence.

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 Additionally, the study focused on only commercial banks. Expanding the scope to include
other service sectors such as telecommunication, insurance, health and hospitality would
provide a stronger basis for generalizing this study’s results.

20. Gyamfi et al17, investigated the performance differences between foreign and local banks
in Ghana. The study deployed ratio analysis to examine how the 25 selected local and
foreign banks performed; with the use of time series data from 2005-2010. Parameters
employed were Asset Quality, ROA, Management Efficiency, ROE, Capital Adequacy,
Bank size, Earning Performance and Liquidity. The study found that on both ROA and
ROE, local Ghanaian banks performed better than foreign banks. The foreign banks on the
other hand, showed greater capital adequacy ratio and more quality assets (loans) than their
local counterparts. The study also found local banks more efficiently managed than foreign
ones; while the foreign banks are more liquid and have more earnings power relative to the
local banks in Ghana. However, performance was not measured against a standard
threshold such as industry averages which could have provided a more comprehensive
report on their performance.

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CHAPTER 3: RESEARCH METHODOLOGY

3.1 Objectives of the Study

3.2 Research Hypothesis

3.3 Scope of Study

3.4 Limitation of the Study

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 RESEARCH METHODOLOGY

3.1 Objectives of the study:

 The study's main goal is to learn about TVS Motors and Hero MotoCorp's financial
strengths and weaknesses using Comparative Financial Ratio research.
 To assess the company's performance using ratios as a yardstick for measuring
productivity.
 To gain a better understanding of the companies' liquidity, profitability, and
 To assess and examine different aspects of a company's financial performance.
 To examine the different components of TVS Motors Company and Hero Motors' financial
statements for the past five years and review them in order to determine the companies'
financial power.

3.2 Research Hypothesis:

3.3 Scope of the study:

3.3.1 Name of the companies:

 TVS Motors
 Hero Motors

3.3.2 No. of years taken for study: 5

3.3.3 Ratios used are:

 Profitability Ratio- Net Profit Ratio, Operating Ratio

 Turnover Ratio- Stock Turnover ratio, Debtors Turnover Ratio, Working capital
Turnover Ratio

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  Liquidity Ratio- Current Ratio, Liquid Ratio
 Solvency Ratio- Debt-Equity Ratio, Fixed Assets Ratio

3.4 Limitation for the study:

 Have not taken any other company.

 Have not taken any other ratios other than above mentioned ratios for calculation.

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CHAPTER 4: DATA REPRESENTATION AND ANALYSIS

4.1 Data representation & interpretation

4.2 Hypothesis testing

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4.1 DATA REPRESENTATION AND INTERPRETATION:

4.4.1 PROFITABILITY RATIOS- The earnings power of an organization is calculated by this

ratio. They demonstrate how effectively an organization uses its assets to generate profit and value
for its shareholders.

A. Net Profit Ratio: It determines the relationship between a company's net profit and
revenue. A good margin varies by industry, but a 10% net profit margin is considered
average, a 20% margin is considered high, and a 5% margin is considered low. Its formula
is:

Net Profit Ratio= Net Profit*100/Net sales

Significance:
 The net profit margin is the amount of net income produced as a percentage of total sales.
 The net profit margin assists investors in determining whether a company's management
is generating enough profit from its revenue and whether operating expenses and
overhead costs are being kept under control.
 One of the most significant indicators of a company's overall financial health is its net
profit margin.

Net Profit Ratio

Year TVS Hero
2016 0.21 0.92
2017 0.20 0.83
2018 0.18 0.85
2019 0.17 0.82
2020 0.13 0.91

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 Net Profit Ratio
1.00 0.92 0.91
0.90 0.83 0.85 0.82
0.80
0.70
0.60
0.50
0.40
0.30 0.21 0.20 0.18 0.17
0.20 0.13
0.10
-
2016 2017 2018 2019 2020

TVS Hero

The Net Profit ratio calculation for TVS Motors is 21% for the year 2015-2016, 20% for
the year 2016-2017, 18% for the year 2017-2018, 17% for the year 2018- 2019, 13% for
the year 2019-2020 and for Hero Motors is 92% for the year 2015-2016, 83% for the year
2016-2017, 85% for the year 2017-2018, 82% for the year 2018- 2019, 91% for the year
2019-2020. A high net profit ratio suggests that the company's profitability has been strong.
A low net profit ratio, on the other hand, means that the company's profitability is weak.
The net profit ratio of Hero Motors is better that of TVS Motors in all the 5 years which
means Hero Motors is performing well.

B. Operating Ratio: The operating ratio compares a company's overall operating cost
(OPEX) to net revenue to determine management performance. The operating ratio
demonstrates how well a company's management keeps costs down when increasing
revenue or sales. The lower the percentage, the more effective the business is at producing
sales compared to overall expenses. Its formula is:

Operating Ratio= Operating Cost/Net Sales*100

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 Significance:

 The operating ratio compares a company's gross operating cost to net revenue to determine
how efficient its management is in managing cost.
 A declining operating ratio is regarded as a positive indicator, as it shows that operating
expenses are becoming a smaller percentage of net sales.

Operating Ratio
Years TVS Hero
2016 93.30 85.49
2017 93.50 84.97
2018 92.70 83.94
2019 92.13 85.35
2020 91.81 86.27

Operating Ratio
96.00
93.30 93.50
94.00 92.70 92.13 91.81
92.00
90.00
88.00 86.27
85.49 84.97 85.35
86.00
83.94
84.00
82.00
80.00
78.00
2016 2017 2018 2019 2020

TVS Hero

The operating ratio calculation for TVS Motors is 93.3% for the year 2015-2016, 93.5%
for the year 2016-2017, 92.7% for the year 2017-2018, 92.13% for the year 2018- 2019,
91.81% for the year 2019-2020 and for Hero Motors is 85.49% for the year 2015-2016,
84.97% for the year 2016-2017, 83.94% for the year 2017-2018, 85.35% for the year 2018-
2019, 86.27% for the year 2019-2020. It's preferable to have an operating ratio of 80 or

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 less. A high operating ratio means that the company's costs are high, resulting in a decrease
in earnings. A low operating ratio, on the other hand, is a positive measure for the business
because it demonstrates how well the company keeps costs low when producing income or
sales. The operating ratio of Hero Motors here again is better than that of TVS Motors in
all the 5 years which means Hero Motors is performing well.

4.4.2 TURNOVER RATIOS- The sum of assets or liabilities that a business substitutes in
relation to its revenue is represented by this ratio.

A. Stock Turnover Ratio: The amount of times inventory is sold or consumed in a given time
span is measured by inventory turnover. For most industries, a healthy inventory turnover
ratio is between 5 and 10, indicating that you sell and restock your inventory every 1-2
months. This ratio strikes a good balance between keeping enough stock on hand and not
having to reorder too much. Its formula is:

Stock Turnover Ratio=

Cost of goods sold/Average Stock or Inventory

Significance:

 It assesses the soundness of a retailer's inventory procedures.

 It also reveals a lack of inventory preparation and management strategies.
 A retailer can easily improve his profitability by bringing less inventories by improving
Inventory Turnover.
 Inventory Turnover provides a useful comparison and keeps the retailer up to date with
current trends.

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 Stock turnover ratio
Years TVS Hero
2016 12.54 28.98
2017 11.91 32.17
2018 11.88 30.38
2019 12.93 24.60
2020 10.96 18.20

Stock turnover ratio

35.00 32.17
30.38
28.98
30.00
24.60
25.00

20.00 18.20

15.00 12.54 11.91 11.88 12.93

10.96
10.00

5.00

-
2016 2017 2018 2019 2020

TVS Hero

The stock turnover ratio calculation for TVS Motors is 12.54 for the year 2015-2016, 11.91
for the year 2016-2017, 11.88 for the year 2017-2018, 12.93 for the year 2018- 2019, 10.96
for the year 2019-2020 and for Hero Motors is 28.98 for the year 2015-2016, 32.17 for the
year 2016-2017, 30.38 for the year 2017-2018, 24.6 for the year 2018- 2019, 18.2 for the
year 2019-2020. A stock turnover ratio of 5-10 is regarded as ideal. The higher a company's
inventory turnover ratio is in a given year, the better it is for its future. Low inventory
turnover equates to low revenue, excess inventory (overstocking), and poor inventory
liquidity. By looking at both the companies, Hero Motors is performing well than TVS
Motors in this ratio too in all the 5 years which indicates that there is considerable demand
for Hero products.

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A. Debtors Turnover Ratio: The Debtors Turnover ratio demonstrates how easily credit
purchases are converted to cash. The higher the ratio, the better, as it indicates that debts
are being recovered quickly. Its formula is:

Debtors Turnover Ratio=

Net Credit Sales/Average Debtors

Significance: This ratio shows how well debtors or revenues are managed. The term "high
debtor turnover ratio" refers to the efficient management of debtor sales and debtor
liquidation, and vice versa. For Debtors Turnover Ratio, there is no rule of thumb or normal
ratio.

Debtors turnover ratio

Year TVS Hero
2016 1.95 0.63
2017 2.34 0.60
2018 2.34 0.54
2019 2.04 0.59
2020 2.06 0.55

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 Debtors Turnover Ratio
2.50 2.34 2.34
2.04 2.06
1.95
2.00

1.50

1.00
0.63 0.60 0.54 0.59 0.55
0.50

-
2016 2017 2018 2019 2020

TVS Hero

The debtors turnover ratio calculation for TVS Motors is 1.95 for the year 2015-2016, 2.34
for the year 2016-2017, 2.34 for the year 2017-2018, 2.04 for the year 2018- 2019, 2.06 for
the year 2019-2020 and for Hero Motors is 0.63 for the year 2015-2016, 0.60 for the year
2016-2017, 0.54 for the year 2017-2018, 0.59 for the year 2018- 2019, 0.55 for the year
2019-2020. A debtor turnover ratio of 6 is considered ideal, meaning that debtors purchase
and pay back 6 times per year on average. The higher a company's debtors turnover ratio
is in a given year, the better it is for the business. By looking at both the companies, debtors
turnover ratio of the TVS Motors is more than that of Hero Motors in this 5 years which
indicates that TVS Motors is more efficient than Hero Motors at collecting credit from the
customers.

B. Working Capital Turnover Ratio: Working capital turnover is a metric that calculates
how effectively a business uses its cash to fund revenue and expansion. A high ratio,
typically over 80%, may mean that a business lacks sufficient capital to sustain its sales
growth. Its formula is:

Working Capital Turnover Ratio= Cost of Goods Sold/Working Capital

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Significance: Working capital is a measure for determining how effectively a business is
run and how financially secure it is in the short term. The working capital ratio, which is
calculated by dividing current assets by current liabilities, determines if a business has
enough cash flow to pay off short-term debts and expenditures.

Working capital turnover ratio

Years TVS Hero
2016 -20.87 79.80
2017 -14.92 6.36
2018 -9.55 4.99
2019 -15.61 5.85
2020 -9.47 4.57

Working capital turnover ratio

100.00
79.80
80.00

60.00

40.00

20.00 6.36 4.99 5.85 4.57

-
2016 2017 2018 2019 2020
(20.00) (9.55) (9.47)
(14.92) (15.61)
(20.87)
(40.00)

TVS Hero

The working capital turnover ratio calculation for TVS Motors is -20.87 for the year 2015-
2016, -14.92 for the year 2016-2017, -9.55 for the year 2017-2018, -15.61 for the year
2018- 2019, -9.47 for the year 2019-2020 and for Hero Motors is 79.8 for the year 2015-
2016, 6.36 for the year 2016-2017, 4.99 for the year 2017-2018, 5.85 for the year 2018-
2019, 4.57 for the year 2019-2020. Greater productivity is shown by a higher ratio. A ratio
in the neighborhood of 2 is considered fine, while a ratio of less than 1 is a clear predictor
of potential liquidity issues. In the chart, working capital turnover ratio of Hero Motors is
more than 1 whereas ratio of TVS Motors is negative in all the 5 years which means that

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 the company's liabilities are high. Clearly, it can be seen that Hero Motors is performing
well than TVS Motors in this ratio as well.

4.4.3 LIQUIDITY RATIOS: The consequence of separating cash and other financial assets by
short-term borrowings and current liabilities yields liquidity ratios. They demonstrate how many
times the cash and liquid assets will offset short-term debt obligations. Liquidity levels greater
than one suggest that the corporation is in good financial shape and is less likely to go bankrupt.

A. Current Ratio: The current ratio assesses a firm's ability to meet short-term commitments,
such as those due within a year. A healthy current ratio is between 1.2 and 2, indicating
that the company has 2 times more current assets than liabilities to offset its liabilities. Its
formula is:

Current Ratio= Current Assets/Current Liabilities

Significance:

 This financial measure aids in determining a company's current financial position.

 A higher ratio usually means more liquidity and stability.
 It also aids in determining a company's ability to handle creditors.
 The financial instrument aids in a better understanding of a company's working
capital requirements.
 This ratio can also be used to determine a company's operating cycle and its ability
to generate sales.

Current Ratio
Year TVS Hero
2016 0.81 1.78
2017 0.77 1.82
2018 0.68 2.04
2019 0.78 1.96
2020 0.72 2.08

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 Current Ratio
2.50
2.04 2.08
1.96
2.00 1.78 1.82

1.50

1.00 0.81 0.77 0.78 0.72

0.68
0.50

-
2016 2017 2018 2019 2020

TVS Hero

The current ratio calculation for TVS Motors is 0.81 for the year 2015-2016, 0.77 for the
year 2016-2017, 0.68 for the year 2017-2018, 0.78 for the year 2018- 2019, 0.72 for the
year 2019-2020 and for Hero Motors is 1.78 for the year 2015-2016, 1.82 for the year 2016-
2017, 2.04 for the year 2017-2018, 1.96 for the year 2018- 2019, 2.08 for the year 2019-
2020. A high current ratio indicates that the company is liquid and capable of meeting its
current obligations on time, when and when they are due. The protection of short-term
creditors' funds is higher. A low current ratio, on the other hand, means that the firm's
liquidity situation is poor. A strong current ratio ranges from 1.2 to 2, indicating that the
company has 2 times more current assets than liabilities to support its debts. The above
chart shows that Hero Motors’ current ratio is around 2 in all the 5 years which is a good
sign for the company whereas TVS Motors’ current ratio is below 1.2 which is not a good
indicator. Hence, here also Hero Motors is performing well than TVS Motors in terms of
current ratio.

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B. Liquid Ratio: A liquidity ratio is a financial ratio that is used to assess a company's ability
to meet its short-term debt obligations. The ideal sound fast ratio is 1:1, and the
construction industry follows this norm. Its formula is:

Liquid Ratio= Liquid Assets/Current Liabilities

Significance: The fast ratio is important to lenders because it indicates the percentage of a
company's debts that could be paid off rapidly by turning assets into cash. Lenders also
consider this ratio because the more liquid a company's assets are, the better suited it is to
respond to changing market conditions.

Liquid Ratio
Year TVS Hero
2016 0.51 1.59
2017 0.43 1.66
2018 0.43 1.85
2019 0.49 1.71
2020 0.49 1.81

Liquid Ratio
2.00 1.85 1.81
1.80 1.66 1.71
1.59
1.60
1.40
1.20
1.00
0.80
0.60 0.51 0.49 0.49
0.43 0.43
0.40
0.20
-
2016 2017 2018 2019 2020

TVS Hero

The liquid ratio calculation for TVS Motors is 0.51 for the year 2015-2016, 0.43 for the
year 2016-2017, 0.43 for the year 2017-2018, 0.49 for the year 2018- 2019, 0.49 for the

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 year 2019-2020 and for Hero Motors is 1.59 for the year 2015-2016, 1.66 for the year 2016-
2017, 1.85 for the year 2017-2018, 1.71 for the year 2018- 2019, 1.81 for the year 2019-
2020. If the real quick ratio is equal to or greater than the normal quick ratio of 1:1, the
company is liquid and can pay its immediate liabilities without difficulty. However, if the
quick ratio is lower than the normal ratio, the company is not liquid. A high current ratio
indicates that the company is liquid and capable of meeting its current obligations on time,
when and when they are due. The above chart shows that quick ratio of TVS Motors is less
than 1 in all the 5 years which indicates that the liquidity position of the company is not
good. The quick ratio of Hero Motors is more than 1 in all the 5 years which clearly shows
that the capacity of the company is reasonably good. Hence, in this ratio Hero Motors is
performing well than TVS Motors.

4.4.4 SOLVENCY RATIOS: A solvency ratio is a measure of a company's financial stability

that determines if its cash flow is adequate to meet its long-term liabilities.

A. Debt-Equity Ratio: The debt-equity ratio is a measure of the creditors' and shareholders'
or owners' respective contributions to the capital employed in a company. While the ideal
debt-to-equity ratio varies by sector, the general consensus is that it does not exceed 2.0.
Although some very large companies in fixed asset-heavy industries may have ratios
greater than 2, others may have ratios lower than 2. Its formula is:

Debt-Equity Ratio= Debt/Equity

Significance:

 The debt-to-equity ratio is a key metric in financial analysis that allows prospective
investors to assess a company's health.
 The debt-to-equity ratio is also useful in determining shareholder earnings. When a
business has a lot of debt, it has to pay a lot of interest, which cuts into earnings. A drop in
earnings means a drop in dividends paid to common shareholders.

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 When a small business applies for a loan, lenders and creditors look at the debt to equity
ratio. It indicates the entity's credit worthiness and how consistent they are with instalment
payments.
 It is beneficial for management to explain market rivalry. The debt-to-equity ratio can be
used to compare an entity's results to that of its rivals. This can aid management in making
impromptu decisions in order to achieve the optimal debt/equity ratio.

Debt-equity ratio
0.3
0.252 0.25003
0.25
0.212
0.195
0.2

0.15
0.1103
0.1

0.05

0
2016 2017 2018 2019 2020

TVS Hero

The debt-equity ratio calculation for TVS Motors is 0.252 for the year 2015-2016, 0.195
for the year 2016-2017, 0.1103 for the year 2017-2018, 0.212 for the year 2018- 2019,
0.25003 for the year 2019-2020 and for Hero Motors is nil for all the year 5 years. While
the ideal debt-to-equity ratio varies by sector, the general consensus is that it does not
exceed 2.0. In the chart, it can be seen that the debt-equity ratio of both the companies is
below 2 in all the 5 years which indicates a good sign. Hero Motors can be seen better than
TVS Motors in term of this ratio as Hero Motors do not have any debt-equity ratio in any
of the 5 years.

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B. Fixed Assets Ratio: The Fixed Assets Ratio shows how much fixed assets each unit of
long-term funds is financing. A fixed asset turnover ratio of 2.5 or more is considered
strong in the retail sector, while a business in the utilities sector is more likely to strive for
an asset turnover ratio of 0.25 to 0.5. Its formula is:

Fixed Assets Ratio=

Net Fixed Assets/Shareholders’ Funds+Long-term Liabilities

Significance: The fixed asset turnover ratio measures how well a business generates
revenue from its current fixed assets. A higher ratio indicates that management is making
better use of its fixed assets. A high FAT ratio says nothing about a company's ability to
produce consistent revenues or cash flows.

Fixed assets ratio

Years TVS Hero
2016 0.55 0.33
2017 0.54 0.36
2018 0.58 0.32
2019 0.49 0.29
2020 0.44 0.32

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 Fixed assets ratio
0.70
0.58
0.60 0.55 0.54
0.49
0.50 0.44
0.40 0.36
0.33 0.32 0.32
0.29
0.30

0.20

0.10

-
2016 2017 2018 2019 2020

TVS Hero

The fixed assets ratio calculation for TVS Motors is 0.55 for the year 2015-2016, 0.54 for
the year 2016-2017, 0.58 for the year 2017-2018, 0.29 for the year 2018- 2019, 0.32 for
the year 2019-2020 and for Hero Motors is 0.33 for the year 2015-2016, 0.36 for the year
2016-2017, 0.32 for the year 2017-2018, 0.29 for the year 2018- 2019, 0.32 for the year
2019-2020. Fixed assets ratio of both the companies are good but as it can be seen in the
chart that ratio of TVS Motors is more that of Hero Motors for all the 5 years which
indicates that the TVS Motors is using its fixed assets to generate sales better than Hero
Motors.

4.2 Hypothesis testing

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CHAPTER 5: RESULTS AND DISCUSSIONS

5.1 Major Findings

5.2 Discussions & Suggestions

5.3 Conclusion

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5.1 Major Findings:
 Hero Motors is growing and grooming as a consulting firm in the automobile industry by
looking at their achievements and financial report of the company.
 The Hero Motors Net Profit ratio is higher than ideal norm 80%. It shows good financial
position of company.
 Both the companies, TVS Motors and Hero Motors operating ratio are above 80%. This
means both the companies will have to make effort to reduce operating cost.
 A stock turnover ratio of 5-10 is regarded as ideal ratio and both TVS Motors and Hero
Motors is above this range which means the higher a company's inventory turnover ratio is
in a given year, the better it is for its future.
 A debtor turnover ratio of 6 is regarded as ideal ratio. But in this both the companies i.e.
TVS Motors and Hero Motors are having ratios below 6.
 The TVS Motors working capital turnover ratio is lower than ideal Ratio 2 which is a clear
predictor of potential liquidity issues.
 The Hero Motors Current ratio is higher than ideal ratio which shows that the company
more current assets than liabilities to offset its liabilities. But all the current ratio of TVS
Motors is below ideal ratio, so the organisation should put its full effort into reducing
current liabilities in order to keep liquid capital at an optimal pace.
 A liquid ratio of 1:1 is regarded as ideal ratio. The ratio of Hero Motors in all the years is
more than 1 which shows the company is liquid and can pay its immediate liabilities
without difficulty.
 A debt-equity ratio of 2 is regarded as ideal ratio and both the companies i.e. TVS Motors
and Hero Motors are having ratios less than 2 which indicates the good sign for both the
companies.
 A fixed asset turnover ratio of 2.5 or more is considered strong and TVS Motors are having
ratios more than 2.5 which means they are generating more cash flow by selling assets.

5.2 Discussion and suggestions:

 It is suggested to Hero Motors to continue the same with respect to the net profit ratio,
current ratio, liquid ratio, working capital turnover ratio as these are higher ideal norm
which is beneficial for the company.

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  It is suggested to TVS Motors to continue the same with respect to the fixed assets turnover
ratio as this ratio is higher ideal norm which is beneficial for the company.
 It is suggested to both TVS Motors and Hero Motors to continue the same with respect to
the stock turnover ratio, debt-equity ratio as these are satisfying ideal norm which is
beneficial for both the companies.
 It is suggested to Hero Motors to make sincere attempts to improve its fixed assets ratio by
selling more.
 It is suggested to TVS Motors to make sincere attempts to improve its net profit ratio,
current ratio, liquid ratio, working capital turnover ratio by improving sales and reducing
liabilities by paying off debts.
 It is suggested to both Hero Motors and TVS Motors to make sincere attempts to reduce
operating profit and improve debtors turnover ratio by making more profits by way of sales
and by collecting more from debtors.

5.3 Conclusion:
The study was conducted on the comparative study of financial performance of TVS Motors and
Hero Motors for the period of 5 years. From the study it is determine that Hero Motors company
financial performance was seeing to be sound than the TVS Motors company, because the
company tries to increase its production and also net profit. So, the investors can make decision to
invest in Hero Motors Company.

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 REFERENCES

Websites:-

https://www.heromotocorp.com/en-in/

https://en.wikipedia.org/wiki/Hero_MotoCorp

https://www.tvsmotor.com/

https://ajmjournal.com/HTMLPaper.aspx?Journal

https://www.bartleby.com/essay/Literature-Review-Of-Financial-Statement-PJ5X4ZQ9N6

Others: Books and Magazines: -

Management Accounting by Dr. S.P. Gupta and Dr. K.L. Gupta, Sahitya Bhawan Publications

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 ANNEXURE

Balance Sheet of TVS Motors for the year 2016-17:

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Statement of Profit and Loss of TVS Motors for the year 2016-17:

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Balance Sheet of TVS Motors for the year 2017-18:

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Statement of Profit and Loss of TVS Motors for the year 2017-18:

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Balance Sheet of TVS Motors for the year 2018-19:

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Statement of Profit and Loss of TVS Motors for the year 2018-19:

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Balance Sheet of TVS Motors for the year 2019-20:

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Statement of Profit and Loss of TVS Motors for the year 2019-20:

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Balance Sheet of Hero Motors for the year 2016-17:

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Statement of Profit and Loss of Hero Motors for the year 2016-17:

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Balance Sheet of Hero Motors for the year 2017-18:

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Statement of Profit and Loss of Hero Motors for the year 2017-18:

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Balance Sheet of Hero Motors for the year 2018-19:

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Statement of Profit and Loss of Hero Motors for the year 2018-19:

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Balance Sheet of Hero Motors for the year 2019-20:

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Statement of Profit and Loss of Hero Motors for the year 2019-20:

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